The Minneapolis housing market has experienced the same level of upheaval in its real estate industry as the rest of the country. The real estate market across the United States has experienced a boom due to historically low mortgage interest rates, and Minneapolis is no exception. The COVID housing boom has impacted multiple real estate market factors — today we’re exploring all these market factors and talking about whether Minneapolis homes make a sound financial investment.
National and Local Mortgage Interest Rates
The COVID pandemic began in earnest in March of 2020, and stay-at-home orders left millions of Americans unemployed. To avoid a major economic depression, the Federal Reserve slashed interest rates and began a bond-buying program. The intention behind these rate cuts was to prevent a wave of mortgage loan defaults and home foreclosures from newly unemployed borrowers and stimulate the stalled economy. In addition, these rates revitalized the real estate industry by providing a refinancing option for current homeowners and making borrowing more attractive to new home buyers.
The Fed cuts are still impacting average national mortgage interest rates, but there has been a steady increase in the rate since the initial cuts. As of December 29, 2021, the average 30-year fixed-rate mortgage is 3.24%. Minnesota mortgage rates are also at record lows — even lower than the average national rate at 2.95% as of December 29, 2021.
The interest rate was recently raised to this level, and there are more increases to come. If buying Minneapolis homes is on your radar, it’s best to do so now before rates rise anymore.
Interest Rates Are Still Fluctuating
The Federal Reserve’s actions substantially impacted the interest rates, but this effect was more indirect than direct. Other factors that influence mortgage rates, such as the rise and fall of consumer confidence and COVID variant spikes, temporarily mitigated rising mortgage rates. The mortgage rate will fluctuate as a result of those changes, but the general trend since March of 2020 has been a steady increase. Local and national mortgage rates are expected to increase through 2022, continuing the current trends and Federal Reserve actions.
As the economy recovers, the Federal Reserve is projecting three rate hikes and a decrease in bond purchases through 2022 to counteract rapidly rising inflation rates. It’s rare for an economy to experience both high inflation and low-interest rates simultaneously, and it won’t last long. Though interest rates will soon increase as a result of high inflation, the current climate is advantageous to borrowers.
COVID and the Real Estate Industry
The real estate industry has experienced a transformation in how consumers purchase real estate because of the pandemic. COVID has also impacted consumer preferences for homes, changing how homeowners prioritize different characteristics.
Nationally, COVID-era stimulus packages threw the real estate industry into highly competitive seller's markets, with the average home selling over or at the list price. House prices also steadily increased through the pandemic, and the average number of days a house spent on the market was significantly lower than pre-pandemic levels.
Current averages show a typical home will only remain on the market for one week. Let’s discuss the intensity of these factors' effect on Minneapolis houses for sale and the real estate market in detail below.
The Housing Market in Minneapolis
Current Minneapolis houses for sale are experiencing a highly-competitive seller's market. According to the Redfin Complete Score, the Minneapolis housing market scores 71/100 on the competitiveness scale and is classified as very competitive.
Redfin outlines what this classification means specifically for Minneapolis houses for sale. Most homes will get multiple offers, and the average home will sell for approximately 1% above the list price. An estimated 42.1% of Minneapolis homes were sold above the list price in November 2021 — a decrease of 4.7 points year over year. The median price of Minneapolis houses for sale is $319,950, which increased by 7.7%, while median days on the market increased by three days from the year before.
The median number of days a house spent on the market in November 2021 was 22 days, while the number of Minneapolis homes sold in November of 2021 (1,056) decreased 11.9% from November 2020. Still, it is worth noting that the total number of active Minneapolis houses for sale also decreased by 16.2%, which can be presumed to have led to the decline in homes sold in 2021.
Key housing market factors indicate that Minneapolis housing demand has begun to exceed its supply, which will increase market competition.
Why Invest in Minneapolis Homes?
In the past 10 years, the Minneapolis area has shown itself to be one of the nation's best long-term real estate investments. High home value appreciation values are not the only benefit of investing in the Minneapolis real estate market. The job market for the city is strong — Minneapolis workers average approximately $6,000 more in their annual salary than the national average.
The COVID pandemic has shown how radically and suddenly the real estate market can change. The lowering of the mortgage interest rate created a robust real estate boom in the middle of one of the worst economic crises of the era. Experts project that the majority of the factors that produced this boom will recede in the next few years, but in the meanwhile, the current Minneapolis real estate market uniquely favors both sellers and borrowers.
If you’re ready to buy or sell Minneapolis homes, reach out to trusted local agent Isaac Kuehn for expert guidance throughout the entire process.
